1. Field of the Invention
The present invention relates to a method for maximizing retirement income using financial bridge products and deferred Social Security income.
2. Related Art
In recent years, employees have become increasingly responsible for providing retirement income. In large part, such responsibility is attributable to a shift by employers away from defined benefit pension plans to defined contribution plans, such as 401 (k) plans. Additionally, Social Security income is relied upon to supplement retirement income. However, income provided to a retired person by these sources may not be sufficient because of inflation, increases in cost of living expenses, spending of savings, longevity, investment performance, investment expenses, taxation, and other factors. Thus, there is a need to maximize retirement income over the course of one's retirement.
Regulations of the Social Security Administration provide that an individual can withdraw Social Security benefits at a pre-defined full retirement age. Prior to the full retirement age, reduced benefits can be taken as early as age 62. However, delayed retirement credits are awarded by the Social Security Administration if Social Security benefits are deferred past the full retirement age. Accordingly, there is an incentive for individuals to defer Social Security income as long as possible. However, if such income is deferred, the individual must be provided with an alternate source of retirement income (i.e., a bridge product) extending from the actual date of retirement to the deferred date of receipt of Social Security benefits.
There are numerous financial products used by individuals to save money and/or to provide income. For example, an annuity represents a financial product, often in the form of a contract between a prospective retiree and an insurance company, whereby payments are provided to the retiree at specified intervals after retirement. Annuities are tax-deferred, whereby annuity income is not taxed until withdrawal. A fixed annuity provides a constant payment amount over the life of the annuity, while a variable annuity does not. Other financial products include, but are not limited to, Funding Agreement Note Issuance Program (FANIP), settlement option under a deferred annuity, automatic withdrawals from deferred annuities or mutual funds, certificates of deposit, bonds, and fixed income.
While deferred Social Security benefits and annuities are known in the art, what presently is lacking is an efficient method for maximizing retirement income, wherein a variety of income scenarios of a potential retiree and his/her spouse are modeled, the client can select an optimal scenario, and the client is provided with at least one financial bridge product and defers Social Security benefits to maximize retirement income.